Daily Business Briefing
June 2, 2021Updated
June 2, 2021, 2:49 p.m. ET
A dormant JBS processing plant in Greeley, Colo.Credit…Chet Strange/Getty Images
Production began to resume at nine beef plants in the United States on Wednesday after a cyberattack on the world’s largest meat processor forced them to shut down a day earlier.
Union officials said Wednesday that certain plants were operational but were not at full capacity yet. JBS had said late Tuesday that the “vast majority” of its plants would reopen the next day.
About 400 workers were back on the job at the JBS beef plant in Souderton, Pa., versus about 1,500 who would work in a typical day, said Wendell Young IV, the president of the United Food and Commercial Workers Local 1776, which represents workers at the plant. A JBS beef plant in Cactus, Texas, canceled work for many employees scheduled for one of its shifts on Wednesday, according to a Facebook post meant for workers.
Mr. Young added that the company had told the union that the plant would be running essentially as normal by Thursday, although workers’ start times would be delayed by a few hours.
JBS did not immediately return requests for comment.
The attack has raised concerns about the vulnerability of critical American businesses. Jen Psaki, the White House press secretary, urged companies on Wednesday to increase their cybersecurity measures, saying it was “up to a number of these private-sector sector entities to protect themselves.”
Ms. Psaki declined to say whether the U.S. government was planning to retaliate. “We’re not taking any options off the table in terms of how we may respond, but of course there is an internal policy review process to consider that,” she said.
JBS had told the Biden administration on Tuesday that it was a ransomware attack, and that the ransom demand had come from “a criminal organization likely based in Russia,” a White House official said on Tuesday. Ms. Psaki did not provide more specifics on Wednesday, but she said that the administration was in direct contact with the Russians and that President Biden would bring up the issue of cyberattacks with President Vladimir Putin of Russia when they meet in two weeks.
Thousands of workers in Australia, Canada and the United States were affected as shifts were altered or outright canceled Monday and Tuesday. Some U.S. plants were still not back to regular operations on Wednesday. In Australia, factory workers and graziers have not been told when plants would reopen, local news outlets reported.
Prices could increase as a result of the cyberattack, analysts for the Daily Livestock Report said on Wednesday. And the disruption could lead to less so-called spot supplies, the analysts wrote, which could “leave little available for smaller buyers.”
Even so, the analysts said that the attack was likely to “be only a small part in the big picture” as retail meat prices continue to climb during the summer.
The attack was the second to hamper a critical U.S. business operation. Last month, a ransomware attack on Colonial Pipeline, which transports gas to nearly half the East Coast, set off fuel shortages and panic buying.
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Homebuilding in Delaware last month. Significant growth in employment is expected to start in the second half of 2021, the U.N. labor organization said. Credit…Alyssa Schukar for The New York Times
Global employment will take years to return to prepandemic levels, the United Nations’ labor organization said on Wednesday in a report that urged governments to build social protection systems to avoid the destabilizing effects of deepening economic and social inequality.
The pandemic wiped out around 144 million jobs last year, including a projected 30 million new jobs that would have been created, the International Labor Organization said in its assessment of employment and social trends.
“The hit on labor markets in terms of jobs, and in terms of the effect on people’s incomes, has been four times greater than the financial crisis,” Guy Ryder, the organization’s director general, said in an interview.
The organization expects to see significant growth in employment starting in the second half of 2021, but “this will be uneven and not enough to repair the damage caused by the crisis,” Mr. Ryder said.
Overall, the global economy is unlikely to restore those lost jobs until at least by 2023, and that will depend on progress in curbing the spread of the coronavirus, a prospect now overshadowed by its resurgence in Asia and parts of Latin America.
Rich countries, with access to vaccines and the financial resources to support wage-support plans, will recover faster. The United States is likely to face unemployment of around 5.1 percent this year, the report said, dropping to around 3.9 percent in 2022, a level marginally lower than at the start of the pandemic.
But around the world, some 205 million people will still be unemployed in 2022, up from 187 million before the pandemic started, the organization said, most of them in lower income and poor countries. “This unequal recovery risks accentuating still further inequalities in the world of work between countries and within countries,” Mr. Ryder said.
The pandemic has had a “dramatic” social impact, disproportionately hitting employment of women and youth; reversing progress in reducing forced and child labor, and sharply driving up the number of working people still trapped in poverty, Mr. Ryder said.
“It’s very difficult to make comparisons with the 1930s, but we’re in that sort of territory,” he said, referring to the Great Depression. “Unless we take care of what’s happening in the world of work and labor markets, there are some very unpleasant things that can happen in the world.”
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Katherine Tai, the United States trade representative, said the actions would give time for international tax negotiations to progress.Credit…Pete Marovich for The New York Times
The Biden administration on Wednesday moved closer to imposing tariffs on certain goods from six countries in retaliation for taxes those nations have imposed on digital services offered by companies like Facebook, Amazon and Google.
The United States finalized a list of products that would be subject to tariffs but immediately suspended the levies for 180 days while international tax negotiations proceeded.
Under the administration’s announcement, 25 percent tariffs would apply to about $2.1 billion worth of goods from Austria, Britain, India, Italy, Spain and Turkey.
The Trump administration began investigating those countries’ digital services taxes in June 2020, and the Biden administration faced a one-year deadline to take action.
The announcement comes as countries around the world are trying to reach agreement on a range of international tax issues. Those negotiations are being conducted through the Organization for Economic Cooperation and Development.
“The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes,” Katherine Tai, the United States trade representative, said in a statement. “The United States remains committed to reaching a consensus on international tax issues through the O.E.C.D. and G20 processes.”
Ms. Tai added that the actions on Wednesday “provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs” if necessary at a later date.
In addition to the six countries included in the announcement, France has also been a target for potential retaliatory tariffs by the United States over its digital services tax. The Trump administration planned to put in place tariffs on $1.3 billion worth of French goods, including cosmetics and handbags, but in January, it suspended the tariffs indefinitely.
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A Depop pop-up store in London in 2019.Credit…avid M. Benett/Getty Images
Depop, the fashion resale marketplace beloved by Generation Z, will be acquired by Etsy for $1.6 billion, the two companies announced on Wednesday.
The cash deal, which is expected to close by the third quarter of this year, underscores the growing influence of clothing resale platforms. More shoppers are turning to the secondhand market for something cheaper and — potentially — greener as the overproduction of clothing increasingly adds to landfills.
The trend appears to have been accelerated by the pandemic as more shoppers looked to declutter wardrobes, earn cash by selling their old clothes or set up fashion customization businesses from their bedrooms.
Investor appetite is also on the rise. Last month, Europe’s largest secondhand fashion marketplace, Vinted, raised 250 million euros in a funding round that valued the start-up at €3.5 billion ($4.26 billion), while in the United States companies such as ThredUp and Poshmark have gone public this year.
Depop, which was founded in 2011, has been particularly successful in building a marketplace for younger consumers, who are adopting secondhand fashion faster than any other group. Ninety percent of its users are under 26, with 30 million users across 150 countries. The platform is particularly known for its vintage clothes and streetwear — and for creating a new cohort of online influencers famous for selling their wares.
“We are simply thrilled to be adding Depop — what we believe to be the resale home for Gen Z consumers — to the Etsy family,” said the Etsy chief executive, Josh Silverman.
He said he believed the platform had “significant potential to further scale” and said that he saw “significant opportunities for shared expertise and growth synergies” for Etsy’s apparel sector, which was valued at $1 billion last year.
According to the Boston Consulting Group, the global market for pre-owned apparel is worth up to $40 billion a year — about 2 percent of the total apparel market. It is expected to grow 15 to 20 percent annually for the next five years.
The transaction is expected to close in the third quarter of 2021, subject to antitrust reviews in Britain and the United States.
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The home décor superstore At Home in California.Credit…Getty Images
The home décor superstore At Home agreed last month to sell itself to the private equity firm Hellman & Friedman for about $2.4 billion. But just over a week later, the company’s largest shareholder, CAS Investment Partners, publicly opposed the deal, arguing that it was “grossly” undervalued.
At the heart of the dispute is how to value a company that got a pandemic bounce, but may soon face a new reality. At Home filed its proxy statement on Wednesday, offering an in-depth look at how it is grappling with these dynamics — and the DealBook newsletter broke down the details.
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The pandemic halted those efforts, and At Home’s stock price plunged below $2 a share. But homebound shoppers pushed up net sales by nearly 50 percent in its third quarter — and its share price rose, too. At Home restarted the sales process in November.
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In March, when At Home’s stock was trading at around $28 a share, Hellman & Friedman and another unnamed private equity firm jointly bid $32 a share. Talks continued as At Home’s rebound continued — the company twice updated its projections — prompting Hellman & Friedman to raise its offer five times. (The other firm dropped out after bidding surpassed $32.)
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Hellman finally offered $36 a share, up 17 percent from where At Home’s stock traded before the deal talks leaked. On Wednesday, its shares are trading a little above that, likely on shareholders’ hopes of a higher offer.
The question is how much At Home’s business will continue to grow. CAS thinks the company could be worth more than $135 a share by the end of its 2026 fiscal year, and that the right sale price is therefore above $70 a share — a roughly 128 percent premium.
But At Home is worried that shoppers will revert to prepandemic habits. Other retailers whose businesses jumped during the pandemic have disappointed investors:
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Shares of Home Depot dipped last month despite smashing expectations, and that company declined to provide financial guidance for next year.
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The Container Store also saw its shares fall last month despite topping expectations, and is similarly withholding guidance.
At Home is looking for other buyers. As part of the go-shop provision in the Hellman deal, the retailer has reached out to 17 financial sponsors and seven companies. So far, just one — an investment firm — has signed a nondisclosure agreement, though it has yet to make an offer.
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AMC Entertainment, the movie theater chain that’s been a target of small investors in so-called meme stocks, soared on Wednesday, climbing to a $30 billion market valuation.
The shares rose 115 percent by midafternoon, to above $68 apiece, extending a run that has lifted them by more than 3,100 percent this year. The gains were quick enough to warrant a trading pause on the New York Stock Exchange, a measure aimed to allow traders to catch up to a quickly rising or falling stock.
The trading mirrors a frenzy in shares of GameStop in January. Then, like now, small investors egged each other on in forums like WallStreetBets on Reddit, by sharing their successes and ideas and encouraging more buying. Their reasons vary: Some of the earliest investors were driven by the view that companies like AMC and GameStop were being undervalued, others are hoping to help push up the price to force losses onto hedge funds that bet against the stock, and others still aren’t taking the investment seriously at all.
Shares of GameStop rose about 7 percent on Wednesday, to about $267, but are well below their highs from late January when the stock climbed to as high as $347.
AMC acknowledged its growing base of small investors on Wednesday, saying it would offer them perks like free popcorn. The company said in a statement that more than three million small investors own its shares, and their ownership accounts for more than 80 percent of its shares.
“Many of our investors have demonstrated support and confidence in AMC,” Adam Aron, AMC’s chief executive, said in the statement.
The company has also taken advantage of the run-up in shares to bolster its financial position. AMC on Tuesday said it raised $230.5 million by selling shares to a hedge fund. The hedge fund, Mudrick Capital Management, has since sold the stake, Bloomberg News reported.
Elsewhere in Markets
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Stocks in the United States and Europe were slightly higher on Wednesday. The S&P 500 rose 0.2 percent and the Stoxx Europe 600 climbed 0.3 percent.
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Oil prices climbed with futures continuing at their highest since late 2018. West Texas Intermediate, the U.S. benchmark, climbed above $68 a barrel.
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Recent economic data has pointed to a strengthening economic recovery, but investors are closely watching for inflation that might require central banks to take action that could curb growth. On Wednesday, the Organization for Economic Cooperation and Development said that the annual inflation rate across its 38 member countries rose to 3.3 percent in April 2021, compared with 2.4 percent in March. The jump was fueled by an increase in energy prices of 16.3 percent, the highest rate since September 2008.
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Employees of Verizon put away traffic cones after installing fiber optic cables on 138th Street and Park Avenue in the Mott Haven neighborhood of the Bronx, New York, last week.Credit…Desiree Rios for The New York Times
Veterans of the nation’s decade-long efforts to extend the broadband footprint worry that President Biden’s new infrastructure plan carries the same bias of its predecessors: Billions will be spent to extend the internet infrastructure to the farthest reaches of rural America, where few people live, and little will be devoted to connecting millions of urban families who live in areas with high-speed service that they cannot afford.
There is a political and economic logic to devoting billions of taxpayer dollars to bringing broadband to the rural communities that make up much of former President Donald Trump’s political base, which Mr. Biden wants to win over. But some critics worry that a capital-heavy rural-first strategy could leave behind urban America, which is more populous, diverse and productive, Eduardo Porter reports for The New York Times.
About 81 percent of rural households are plugged into broadband, compared with about 86 percent in urban areas, according to Census Bureau data. But the number of urban households without a connection, 13.6 million, is almost three times as big as the 4.6 million rural households that don’t have one.
Connecting urban families does not require laying thousands of miles of fiber optic cable through meadows and glens. In cities, telecom companies have already installed a lot of fiber and cable. Extending broadband to unserved urban households, most of them in low-income neighborhoods and often home to families of color, typically requires making the connection cheaper and more relevant.
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The new media company that would combine WarnerMedia and Discovery has a name: Warner Bros. Discovery. David Zaslav, the executive who will run the combined companies if the merger is approved by regulators, announced the name at a town-hall-style meeting on Tuesday with WarnerMedia employees in Burbank, Calif. In his first opportunity to introduce himself to his prospective employees, Mr. Zaslav, who has been in charge of Discovery since 2007, spoke with the WarnerMedia chief executive Jason Kilar from the stage of the Steven J. Ross Theater on the Warner Bros. lot. The two executives did not mention the future of Mr. Kilar, who has retained a legal team to negotiate his exit from the company.
Americans will be eligible for a free beer from Anheuser-Busch once the country’s vaccination rate reaches 70 percent.Credit…John Gress/Reuters
The brewing giant Anheuser-Busch said on Wednesday that it would offer Americans another incentive to get vaccinated: free beer.
The company said in a statement that it would “buy America’s next round” of beer, seltzer or nonalcoholic beverage once the country reached President Biden’s goal of having 70 percent of the adult population get at least one coronavirus vaccination by July 4. So far, 63 percent of adult Americans have received at least one dose.
“We pride ourselves on stepping up both in times of need and in times of great celebration, and the past year has been no different,” said Michel Doukeris, the chief executive of Anheuser-Busch, which will offer adults a $5 virtual credit card for beverages if the vaccination goal is met. “As we look ahead to brighter days with renewed optimism, we are proud to work alongside the White House to make a meaningful impact for our country, our communities and our consumers.”
Reaching the vaccination goal by Independence Day may not be easy. The pace of vaccinations in the United States has slowed, with the biggest gains in recent weeks made in vaccinating 12- to 15-year-olds, who are not eligible for the free beer. However, progress has been made in reaching some groups with the highest rates of vaccine hesitancy, including Latinos and people without college degrees, according to the Kaiser Foundation.
Anheuser-Busch’s offer comes as other businesses and states have introduced their own giveaways to encourage vaccinations. Gov. Jim Justice of West Virginia said on Tuesday that the state would give away guns and other prizes, including trucks and lifetime hunting and fishing licenses, to vaccinated residents.
Other states, including California, New Mexico and Ohio, have started lottery drawings to award cash prizes to those who have been vaccinated.
Read moreCredit…Sally Thurer
Today in the On Tech newsletter, Shira Ovide writes that to fully understand the tech industry and ensure that its goals don’t go off the rails, we need to talk more about the companies that are in the meh middle.
